Unlocking
success in digital transformations
PART I
Digital transformations are even more
difficult than traditional change efforts to pull off. But the results from the
most effective transformations point to five factors for success.
As digital technologies dramatically
reshape industry after industry, many companies are pursuing large-scale change
efforts to capture the benefits of these trends or simply to keep up with
competitors. In a new McKinsey Global Survey on digital transformations, more
than eight in ten respondents say their organizations have undertaken such
efforts in the past five years. Yet success in these transformations is
proving to be elusive. While our earlier research has
found that fewer than one-third of organizational transformations succeed at
improving a company’s performance and sustaining those gains, the latest
results find that the success rate of digital transformations is even lower.
The results from
respondents who do report success point to 21 best practices, all of which make
a digital transformation more likely to succeed. These characteristics fall
into five categories: leadership, capability building, empowering workers,
upgrading tools, and communication. These categories suggest where and how
companies can start to improve their chances of successfully making digital
changes to their business.
Transformations are hard, and digital ones are harder
Years of research on
transformations has shown that the success rate for these efforts is
consistently low: less than 30 percent succeed. This year’s results suggest that digital
transformations are even more difficult. Only 16 percent of respondents say
their organizations’ digital transformations have successfully improved
performance and also equipped them to sustain changes in the long term. An
additional 7 percent say that performance improved but that those improvements
were not sustained.
Even digitally savvy industries, such as high tech, media, and telecom, are struggling.
Among these industries, the success rate does not exceed 26 percent. But in
more traditional industries, such as oil and gas, automotive, infrastructure,
and pharmaceuticals, digital transformations are even more challenging: success
rates fall between 4 and 11 percent.
Success rates also vary
by company size. At organizations with fewer than 100 employees, respondents
are 2.7 times more likely to report a successful digital transformation than
are those from organizations with more than 50,000 employees.
The anatomy of digital transformations
Whether a change effort
has succeeded or not, the results point to a few shared traits of today’s
digital transformations. For one, organizations tend to look inward when making
such changes. The most commonly cited objective for digital transformations is
digitizing the organization’s operating model, cited by 68 percent of respondents.
Less than half say their objective was either launching new products or
services or interacting with external partners through digital channels.
Digital transformations also tend to be wide in scope. Eight in ten respondents
say their recent change efforts involved either multiple functions or business
units or the whole enterprise. Additionally, the adoption of technologies plays
an important role across digital transformations. On average, respondents say
their organizations are using four of 11 technologies we asked about, with
traditional web tools cited most often and used in the vast majority of these
efforts.
At the same time, the
results from successful transformations show that these organizations deploy
more technologies than others do. This might seem counterintuitive, given that
a broader suite of technologies could result in more complex execution of transformation initiatives and, therefore, more
opportunities to fail. But the organizations with successful transformations
are likelier than others to use more sophisticated technologies, such as
artificial intelligence, the Internet of Things, and advanced neural
machine-learning techniques.
The keys to success
Having these
technologies on hand is only one part of the story. The survey results indicate
how, exactly, companies should make the technology-supported changes that
differentiate successful digital transformations from the rest.
Our research points to
a set of factors that might improve the chances of a transformation succeeding.
Twenty-one keys to success
Out of 83 practices that were
tested in the survey,1 the following are those that
best explain the success of an organization’s digital transformation:
1. Implement digital tools to make
information more accessible across the organization.
2. Engage initiative leaders (leaders
of either digital or nondigital initiatives that are part of the
transformation) to support the transformation.
3. Modify standard operating
procedures to include new digital technologies.
4. Establish a clear change story
(description of and case for the changes being made) for the digital
transformation.
5. Add one or more people who are
familiar or very familiar with digital technologies to the top team.
6. Leaders engaged in
transformation-specific roles encourage employees to challenge old ways of
working (processes and procedures).
7. Senior managers encourage employees
to challenge old ways of working (processes and procedures).
8. Redefine individuals’ roles and
responsibilities so they align with the transformation’s goals.
9. Provide employees with
opportunities to generate ideas of where digitization might support the business.
10.
Establish one or more
practices related to new ways of working (such as continuous learning, open
physical and virtual work environments, and role mobility).
11.
Engage employees in
integrator roles (employees who translate and integrate new digital methods and
processes into existing ways of working to help connect traditional and digital
parts of the business) to support the transformation.
12.
Implement digital
self-serve technology for employees’ and business partners’ use.
13.
Engage the leader of a
program-management office or transformation office (full-time leader of the
team or office dedicated to transformation-related activities) to support the
transformation.
14.
Leaders in
transformation-specific roles get more involved in developing the digital
transformation’s initiatives than they were in past change efforts.
15.
Leaders in
transformation-specific roles encourage their employees to experiment with new
ideas (such as rapid prototyping and allowing employees to learn from their
failures).
16.
Senior managers get
more involved in digital initiatives than they were in past change efforts.
17.
Leaders in
transformation-specific roles ensure collaboration between their units and
others across the organization when employees are working on transformation
initiatives.
18.
Senior managers ensure
collaboration between their units and others across the organization.
19.
Engage
technology-innovation managers (managers with specialized technical skills who
lead work on digital innovations, such as development of new digital products
or services) to support the transformation.
20.
Senior managers
encourage their employees to experiment with new ideas.
21.
Senior managers foster
a sense of urgency within their units for making the transformation’s changes.
These factors fall into
five categories:
·
having the right,
digital-savvy leaders in place
·
building capabilities
for the workforce of the future
·
empowering people to
work in new ways
·
giving day-to-day tools
a digital upgrade
·
communicating
frequently via traditional and digital methods
CONTINUES IN PART II
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